India's capital market boom attracts world's largest merchant bankers

Tatas move into watches through joint venture Titan Watches in collaboration with the Tamil Nadu Industrial Development Corporation (TIDCO) and Frances Ebauches, a leading Swiss watch component manufacturer.

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January 6, 2014

ISSUE DATE: September 15, 1985

UPDATED: March 25, 2014 17:12 IST

Titan's Time

The Tatas are moving into watches through a joint venture called
Titan Watches, in collaboration with the Tamil Nadu Industrial
Development Corporation (TIDCO) and Frances Ebauches, a leading Swiss
watch component manufacturer. Each of the three partners will hold
between 20 and 26 percent of the equity, with the balance being offered
to the public.

The project, worth Rs 30 crore, will turn out two
million watches annually - quartz analog and mechanical - at a plant
near Hosur in Tamil Nadu (national watch sales total between 12 and 15
million a year, half of it smuggled).

The Tatas have already
pulled off a coup by taking in I.K. Amitha, former executive director of HMT and the doyen of the country's watch industry. For the Tatas, this
will be the second attempt to get into the watch market, the first one
being an abortive tie-up with Hegde and Golay, and promises enormous
growth because the market is growing at between 8 and 10 per cent
annually.

Banking on the Boom

India's capital market boom is beginning to attract some of the
world's largest merchant bankers. Close on the heels of the New
York-based Merrill Lynch and the London-based Warburg S.G. and Hill
Samuel, who are investigating offshore tie-ups with Indian businessmen
to set up mutual funds - or unit trusts - for non-resident Indians and
foreigners interested in putting money into Indian stocks, comes Credit
Suisse First Boston (CSFB). This London-based investment bank has
pioneered non-resident investment in Brazil.

South Korea and
Taiwan, and Chairman Michael von Clemm says his bank is interested in
exploring the idea of a mutual fund if regulatory, tax and other
problems are resolved. The Hindujas are expected to be involved in the
venture, if and when it is floated.

Shady Sales

The company law board (CLB) is investigating the non resident
purchase of shares in the Madras Aluminium Company (MALCO), which the
financial institutions had handed back in mid-1983 to Congress(I) MP, R. Prabhu, who is the son of one of the company's two founders, on the
understanding that he would buy out the 27 percent institutional
holding.

But some of the shares seem to have been acquired by
non-residents. The company's second founder has now complained to the
CLB that the non-residents are Prabhu's front-men, and the CLB has said
it is investigating the matter. Prabhu explains that the non-residents
had approached his brokers in Bombay, and that he had consequently
agreed to sell them some of the company's shares.

Deepening Mystery

The DCM share mystery (India Today July, 15) has taken an unexpected twist, and may go down in corporate history as the first case where a company's chairman emeritus sold shares that the board of directors later refused to transfer into the buyer's name. No fewer than 60,000 shares were sold by Bharat Ram Associates, while a further 1.35 lakh shares were sold by Shriram Fibres (run by Bharat Ram's son) and five of its investment subsidiaries.

Yet the company's board of directors has now decided not to register the new owners of the shares. But the new law on share transfer registrations cannot be applied to the latest share transfer refusal because it has not yet been gazetted.

Shifting Scenes

The Government's policy of liberalising industrial policy seems to have produced quick results, judging from the number of letters of intent and industrial licences issued in the first half of this year. There is an increase of 64 percent in the former, from 500 in January-June 1984 to 822 in January-June 1985, while the increase in industrial licences is from 480 to 565 - an increase of slightly under 20 percent.

This is despite the fact that a number of industries have been de-licensed and only need registration with the department of technical development. Simultaneously, official sanctions for share and debenture issues by a number of companies are also going up, from Rs 2,000 crore last year to between Rs 2,500 and Rs 3,000 crore this year. The number of registrations too has shown a substantial and steady increase over the previous years.

Mounting Costs

The Government has woken up to the unexpectedly large foreign
exchange cost involved in allowing a large number of companies to sign
foreign collaborations for two-wheeler, car and truck projects.

Investigations show that in the first five years of the Maruti project alone, the
foreign exchange cost involved in importing equipment, components, and
in paying royalties and technical fees will total Rs 550 crore. A second car project, in the private sector, is expected to cost Rs 265 crore in foreign exchange over five years, while two other car projects are
likely to cost about as much. Some projects for manufacturing light
commercial vehicles will also have a comparable foreign exchange bill.

A tentative total of the foreign exchange outgo for all the projects
works out to almost Rs 1,800 crore - with further sums likely to be
outward bound because of the associated projects being undertaken by
ancillary units. The final foreign exchange total may be in excess of Rs 3,000 crore. The Government is sufficiently worried by this and has
called for a review of new foreign collaboration proposals.

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